What impact on GameStop's fourth quarter results?

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GameStop Inc (NYSE: GME) recently released its fourth quarter results of fiscal 2018, which were below our estimates, while sales of second-hand video games have dropped. Below we present some of the key elements of the company's earnings, as well as our estimates for 2019.

How did GameStop play over the T4?

• GameStop's fourth quarter revenue was $ 3 billion, down 13% from a year earlier.
• Sales of second-hand video games fell 21%, while video game hardware and software sales decreased 10% and 8%, respectively.
• The company sold its Spring Mobile business last year, which also had an impact on year-over-year growth.
• Adjusted net income was $ 164 million for the quarter, compared to $ 205 million for the fourth quarter of fiscal 2005.
• The company recorded strong growth of 19% in the video game accessories sector, which is currently enjoying a good trend.
• Overall gross margins decreased during the quarter due to lower sales of video games, which offers higher margins.

What impact on sales in 2018?

• New consoles, such as Nintendo Switch, launched in 2017, have boosted video game hardware sales for GameStop.
• Sales slowed in subsequent years, impacting the company's new revenues for video game equipment.
• Declining hardware sales impacted new sales of video game software.
• Fewer stock outs in 2018 compared to 2017 also had an impact on sales.
• The growth in video game accessories sales was driven by the increased demand for audio-related accessories and the Royal Battle (genre of play).

What are the prospects for GameStop for the 2019 financial year?

• Revenues are expected to decrease 2% to $ 8.1 billion in fiscal 2019.
• The continued growth of video game accessories and collectibles should offset some of the expected declines in other segments.
• Margins could be put under additional pressure due to the decline in the number of sales of video games of the occasion.
• Lower revenues and margins will translate into adjusted earnings of $ 1.08 per share in fiscal 2019, compared to $ 2.70 per share in fiscal 2018, in our view.
• Our price estimate of $ 12 for GameStop is based on a multiple of futures multiplied by 11.

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GameStop Inc. (NYSE: GME) recently released its fourth quarter results of fiscal 2018, which were below our estimates, while sales of second-hand video games dropped. Below we present some of the key elements of the company's earnings, as well as our estimates for 2019.

How did GameStop play over the T4?

• GameStop's fourth quarter revenue was $ 3 billion, down 13% from a year earlier.
• Sales of second-hand video games fell 21%, while video game hardware and software sales decreased 10% and 8%, respectively.
• The company sold its Spring Mobile business last year, which also had an impact on year-over-year growth.
• Adjusted net income was $ 164 million for the quarter, compared to $ 205 million for the fourth quarter of fiscal 2005.
• The company recorded strong growth of 19% in the video game accessories sector, which is currently enjoying a good trend.
• Overall gross margins decreased during the quarter due to lower sales of video games, which offers higher margins.

What impact on sales in 2018?

• New consoles, such as Nintendo Switch, launched in 2017, have boosted video game hardware sales for GameStop.
• Sales slowed in subsequent years, impacting the company's new revenues for video game equipment.
• Declining hardware sales impacted new sales of video game software.
• Fewer stock outs in 2018 compared to 2017 also had an impact on sales.
• The growth in video game accessories sales was driven by the increased demand for audio-related accessories and the Royal Battle (genre of play).

What are the prospects for GameStop for the 2019 financial year?

• Revenues are expected to decrease 2% to $ 8.1 billion in fiscal 2019.
• The continued growth of video game accessories and collectibles should offset some of the expected declines in other segments.
• Margins could be put under additional pressure due to the decline in the number of sales of video games of the occasion.
• Lower revenues and margins will translate into adjusted earnings of $ 1.08 per share in fiscal 2019, compared to $ 2.70 per share in fiscal 2018, in our view.
• Our price estimate of $ 12 for GameStop is based on a multiple of futures multiplied by 11.